Is buying a new pharmacy the right thing to do in today’s market.
Last week I was sent the details of a pharmacy for sale. This pharmacy based in the South East was making a net profit of £50k on turnover of £250k. Offers were encouraged at more than £400k.
On this basis if all things stay the same then the Pharmacy will start to make money for the new owners after 8 years. That seems a very long time.
I understand that the value of a pharmacy is based on what anyone is willing to pay and that a multiple of 8 times net profit is normal, it just seems there are better investments to be made.
Lets look at a different use of less money.
Let’s imagine you have a pharmacy group with 20 branches and each branch is doing 75 MDS users. You have at least 0.5 staff member per branch filling trays and therefore 10 FTE in total or 400 hours a week or £2,880 per week (based on £7.20 per hour).
This means your annual wage bill has £150k per annum allocated to the work of filling trays.
There has been no prior investment in productivity improvements in this area.
If you change to Hub & Spoke model and automate the work then this will reduce the hours significantly. We often see a 80% reduction in hours for this area of work meaning that the same work is done by 2 FTE but for this calculation lets keep 4 FTE.
In actual wage costs alone you have then made a saving of £1,728 per week or £90k per annum.
The compliance aid work has been moved to the Hub allowing the existing branches to focus on acute, OTC and services which will have a positive impact on the branch income. It has also has the additional benefit of generating space within the pharmacy and moving some stock holding to the Hub.
Basing this on an automation investment of ~£80k then there is a real payback within 18 months. This supports the real experiences of our customers across the UK who are implementing our solutions.
Buying a new pharmacy to add to your group in a marketplace where they are in demand means paying over the odds. Is this a good use of your time, energy and capital? With the funding changes is it a possibility that more Pharmacies will come onto the market and this surge will depress prices, is it smarter to wait?
In the meantime what about applying time to improving the productivity of the existing group through Hub & Spoke.
